Power shortages in China, which relies on coal for morethan 70 percent of its electricity, may escalate this summer asfuel costs rise and the government caps utility prices, GoldmanSachs Group Inc. said in a note yesterday. About 20 regions havestarted rationing power, Xinhua News Agency reported. Coalstockpiles at ports have dropped to an 11-month low, accordingto the China Coal Transport and Distribution Association, afterimports shrank 26 percent in the first quarter. “It has become profitable again to import,” Huang Teng,general manager at Beijing LT Consultant Ltd. and a former coaltrader at state-owned China National Coal Group, said in atelephone interview. “We will probably see an increase inimports reflected in official data for May.”

Import Prices

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China’s overseas purchases fell 26 percent to 32 milliontons in the first quarter after Australian prices rallied. Coaldelivered to southern China from Newcastle cost as much as$171.20 on Jan. 14, the highest in more than two years,according to data from CLSA Asia Pacific Markets in Hong Kong. Australian deliveries to the southern port of Guangzhoucost about $158 a ton, or $10.10 more than domestic prices,according to Bloomberg calculations based on CLSA data. That’sthe smallest premium since Dec. 17 and a drop of 72 percent fromthe $36.70 high that was set on Feb. 25. The last time domesticsupplies were more expensive than imports was on Nov. 26,according to CLSA data. Indonesia, the world’s largest exporter of thermal coal,also cut the price for sales of the fuel to Asia in April, thesecond monthly reduction, the energy ministry said April 19. “We expected imports would drop this year, now there’scertainly a change as domestic prices are rising faster thaninternational prices,” Helen Lau, a Hong Kong-based analyst forUOB Kay Hian Ltd., said today. “Power stations now say it’sprofitable to import.” China may buy more in the second quarterthan in the first, she said.

‘Alarming Low’

Inventories at Qinhuangdao, which ships more than half ofChina’s coal, fell to 4.89 million tons, the lowest level inalmost a year, the China Coal Transport and DistributionAssociation said May 3. “Stockpiles at some power plants have reached crisislevels,” David Fang, a director at the association, said bytelephone from Beijing. “We thought demand would be stable inthe first quarter but it turned out far too strong.” Power plants had inventories at the end of last monthequivalent to nine days consumption compared with the normal twoweeks, an “alarming low,” Lau said in a report on May 3. “The continuously rising domestic coal price in the lastsix weeks in China testifies the revived dynamism of Chinesecoal demand,” Emmanuel Fages, a Paris-based analyst for SocieteGenerale SA, said in an April 29 report. “Inventories at plantsare reaching low levels ahead of summer.”

Power Shortages

China, the world’s biggest energy user, may face shortagesof 30 gigawatts during the country’s summer as supply lagsbehind demand, the China Electricity Council said April 29.Power demand rose 13 percent to 1.09 trillion kilowatt-hours inthe first quarter, the council said. Consumption may increase 12percent to 4.7 trillion kilowatt-hours this year, whilegeneration capacity may gain 9 percent, it said. A 25 percent surge in benchmark coal costs last year and afreeze in power prices since November 2009 left almost a fifthof state-run coal-fired power plants facing bankruptcy, ChinaPower International Development Ltd. said April 1. “The new topic in the market has become blackouts insummer as some industries are seemingly reducing their output tocombat limited supply, and some local authorities have orderedoutput restrictions already,” Fages said. Coal production is lagging behind demand because ofbottlenecks in transporting the fuel from producer regions inthe north-east to consumers on the coast, UOB Kay Hian’s Lausaid. Maintenance on the Daqin Railway, used for transportingthe fuel from Datong to Qinhuangdao, caused halts of about 4hours a day and resulted in destocking at major Chinese coalports, New York-based Commodore Research said April 26. Demand growth may slow in the longer term as the countryseeks to cap energy use, Neil Beveridge, a Hong Kong-basedanalyst at Sanford C. Bernstein & Co., said in a report on April28. Consumption may increase as little as 2 percent annually inthe next five years, compared with growth exceeding 6 percent inthe preceding five years, he said.